Big Frauds

$100 million mystery behind Mr. Oh's embezzlement

September/October 2017

BySteve C. Morang, CFE, CIA, CRMA

On February 22, Swiss-based global engineering group ABB announced it was the victim of a $100 million internal embezzlement scheme in its South Korean subsidiary. The money and the alleged perpetrator vanished, and an international manhunt is so far unsuccessful. To the best of my knowledge, this is the largest case of employee embezzlement. (See
Switzerland’s ABB hit by $100 million South Korean fraud, by John Revill, Reuters, February 22.)

What makes this case even more interesting is that the suspect, named in the media as 57-year-old ABB Korea Treasurer Myeong-se Oh, was a 25-year veteran of the company. According to the Reuters article, he was the treasurer, the former head of compliance and one of two integrity ombudsmen for the 800-employee ABB Korea at the time of the alleged fraud. In other words, the company entrusted Oh with the treasury plus training on ethics and how to report incidents of potential fraud — either through an ethics hotline or directly to him.

And it was with such a spotless background that Oh embarked on what ABB termed a “sophisticated criminal scheme” that cost his employer dearly. According to the Reuters article, ABB’s group chief executive described the alleged fraud as “shocking news.”

Although this case is far from resolved, I think it’s helpful to look at what we know so far and try to answer the question: How did Oh single-handedly embezzle $100 million over two years from a company that generated only $500 million in annual revenues?

It’s a familiar story. A country or region finally is prosperous, but inevitably fraud and corruption increase. Here are some infamous South Asian cases and ways the region has battled what affluence wrought.

End of the trail

Between 1998 and February 2009, accountant James T. Hammes embezzled more than $8.7 million from his employer, G&J Pepsi-Cola Bottlers Inc. He was indicted shortly thereafter on 75 counts — including 38 for wire fraud and 36 for money laundering — but wasn’t arrested until May 16, 2015. Why did it take so long to arrest Hammes? After the FBI had questioned him in 2009 about the theft, he left his family and life, and began hiking the Appalachian Trail (AT).